Employee Perceptions and Financial Performance

Abstract

A number of studies have found evidence supporting a link between the organizational environment and financial performance. However, several studies have found a mixed support or no support for this link. This study builds on these findings to address the question: Is there a relationship between organizational environment factors and financial performance? Organizational environment data for this study came from employees of a sales and service division of a global manufacturer located in the Midwest of the U.S. A sample of 1,518 respondents, from a total population of 1,615 employees organized in 100 teams, completed a 68-item survey instrument for a response rate of 94%. An exploratory factor analysis generated a model with 11 subscales using 52 items from the original instrument. The subscales are (1) operational effectiveness, (2) immediate manager/supervisor, (3) senior management, (4) mission, (5) valuing employees, (6) training, (7) involvement, (8) corporate social responsibility, (9) satisfaction, (10) teamwork, and (11) inclusion. Cronbach's alpha coefficients for all subscales on the survey were acceptable, ranging from .85 to .90. Team-level factor scores, the predictor variables, were generated by computing factor scores for individual respondents, followed by computing a mean of each of the factor scores from members of each team. This approach produced 11 factor scores for each team. Contribution margin ratio, a measure of profitability, was the outcome variable. This variable was calculated at the team level and is the quotient created when dividing operating income by revenue. This study used contribution margin ratios from five financial periods: four consecutive fiscal quarters and the fiscal year overall. This study found that team-level employee perceptions of organizational environment factors had no to weak relationships between various organizational environment factors and various measures of financial performance. The regression analyses, subsequently, found that organizational environment factors were able to explain only single-digit percentages of variation in financial performance. Implications of these findings with regard to organizational performance are discussed.